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AICPA Speaks Out Against Proposed Model Sales and Use Tax Statute

The
AICPA testified at a hearing May 18 to voice its opposition to a
model statute drafted by the Multistate Tax Commission (MTC) that
would authorize states to require nonresident companies to report
sales transactions with in-state consumers in an effort to increase
use tax compliance. The MTC is an intergovernmental organization
that promotes uniformity in state tax laws.

“Out-of-state
businesses that are not required to collect and remit sales tax
should not be required to police individual use tax noncompliance,”
said Jamie Yesnowitz, vice chair of the AICPA’s State and Local
Taxation Technical Resource Panel during the MTC hearing. “It’s
asking a lot of companies that are not in the state.”

The AICPA
offered several other reasons for
its concern, including the fact that the model statute is based on a
Colorado law that may get overturned in court. The Direct Marketing
Association has sued Colorado over the law and successfully
persuaded a U.S. district court to issue an injunction that stopped
the state’s revenue department from enforcing it (The
Direct Marketing Assn. v. Huber, docket no.
10-cv-01546-REB-CBS (D. Colo. 1/26/11)).

The
marketing association alleges that the law is unconstitutional by
placing an undue burden on interstate commerce. The Colorado law
(Colo. Rev. Stat. §
39-21-112(3.5)) requires
retailers that sell products to customers in Colorado, but do not
collect and remit Colorado sales tax on those transactions, to
annually report certain purchase information to each customer and to
the state revenue department for sales over $500. Retailers with
less than $100,000 in gross annual sales in the state are exempt.

Yesnowitz also cited the fact that the costs of compliance
with the statute could far outweigh the benefits received by the
states. “It is not clear how receipt of information on thousands of
Internet purchases will translate into revenue for the states,” he
said, noting the currently strained resources of state tax agencies.

The
MTC’s Executive Committee will meet in the first week of June to
consider the testimony and recommendations offered by the hearing
officer, MTC General Counsel Shirley Sicilian. The Committee has
several options, including: (1) rejecting the entire statute and
sending it back to the Uniformity Committee for further
consideration, (2) adopting certain amendments, or (3) recommending
it to the whole Commission as it is currently written. The full
Commission will meet in late July.